TRUMPONOMICS and swiss watches

If past is prologue,
Donald Trump will be good for
Swiss watch sales in the United

TRUMPONOMICS and swiss watches

By Joe Thompson/USA

May 2017

If past is prologue,
Donald Trump will be good for
Swiss watch sales in the United

T

here will be plenty of historical firsts when
Donald J. Trump takes the oath of office and becomes
the 45th president of the United States
on January 20. The scariest is that he is the first
person in U.S. history to become president without
having served either in the military or in any government
post. Wish us luck with that.

Then there’s this amazing double first: Trump
is the first President to launch his own watch
line. And Melania Trump is the first First Lady
to do the same thing. His came in 2005 in a
venture with Macy’s, the giant department
store chain. Hers came in 2010 in a tie-up with
QVC, the giant TV home-shopping network.

Swiss watch industry executives anxious to assess the impact
of the Trump presidency on the Swiss watch business in the
U.S. might see the First Couple’s watch launches as a good
omen. It isn’t.

“Enough of this
bullshit, let’s
get on with the
autographs!”

The Donald J. Trump Signature Watch Collection, launched
in 2005, consisted of Far-East-produced quartz watches
priced from $85 to $250 with styles imitating best-selling
Swiss models, like the “Monaco-styled” chronograph. The
future president was not a particular fan of them. At an appearance
at a Macy’s at a mall in Orange County, California
in 2005 to promote his various products, he boasted to the
crowd that the Piaget watch he was wearing cost $100,000
more than the watches that bore his name. Then, according
to the Orange County Register, he declared, “Enough of this
bullshit, let’s get on with the autographs!” Clearly a president
in the making. His watch venture lasted one year.

Melania Trump’s “Melania Timepieces and Jewelry Collection”
befitted the wife of a man who fancies himself “a blue-collar
billionaire.” According to the New York Times, one of
the watches was “a chunky silver watch styled like a bracelet
(‘with holes so you can see the skin,’ Melania noted) for $64.”
No, the best clue to how Swiss watches might fare in the U.S.
during the Trump administration, I believe, lies in Swiss
watch export data. I have covered the U.S. watch market
for 39 years spanning 10 presidential elections. A review of
Federation of the Swiss Watch Industry export data to the
U.S. over that period shows conclusively that in American
presidential elections, the candidate’s political party is
destiny, particularly in terms of economic policies. When
a Republican president takes over from a Democrat, as just
happened, Swiss exports to the U.S. get a big boost followed
by a big bust.

Let’s look at the record:

REAGAN/BUSH 1 Republicans Ronald Reagan and
George H.W. Bush controlled the White House for three
consecutive terms. Reagan’s economic policies, known as
Reaganomics, emphasised tax cuts, decreased social spending,
increased military spending and deregulation of domestic
markets. Reaganomics stimulated the economy but
created enormous deficits. From 1980 to 1990, Swiss watch
exports to the U.S. increased by 113% to CHF 903.9 million
and the U.S. surpassed Hong Kong as the world’s top market
for Swiss watches. But in 1991, the boom went bust. Between
1990 and 1992, exports fell 10.8% and the U.S. dropped to a
humiliating #3 in the Swiss watch ranking after Italy. In the
election of 1992, Bill Clinton’s campaign manager James
Carville gained immortality by making the
slogan “It’s the economy, stupid!” the theme
of the campaign. Clinton won.

CLINTON When the Democrat replaced
the Republican in the White House, there was
no boom/bust cycle. Swiss watch exports to
the U.S. increased every year of Clinton’s two
terms, 1993–2000, an increase of 129% to CHF 1.84 billion. The
U.S. became Switzerland’s top watch market again in 1998.

BUSH 2 In 2001, Republican George W. Bush succeeded
Clinton and the boom-bust cycle resumed.
Between 2002 and 2007, Swiss watch exports to the U.S.
soared 54% to a record CHF 2.44 billion. The bust came in
2007 with the sub-prime loan crisis, which triggered the
Great Recession in 2008. Between 2007 and 2009, Swiss watch
exports to the U.S. fell by an astounding CHF 970 million to
CHF 1.47 billion, sending sales back to the level of 1998! Once
again the U.S. fell behind Hong Kong in the export rankings.

OBAMA During the two terms of Democrat Barak Obama,
the U.S. economy slowly recovered. Between 2009 and 2015,
Swiss watch exports increased 60.3% to CHF 2.36 billion, growing
each year except for a slight dip (-0.8%) in 2015. However,
they never quite regained the record level of 2007.

TRUMP Odds are good that Trump will bring a new
Republican boom-bust cycle. Trumponomics will stimulate
the economy with tax cuts directed at the wealthy and corporations,
increased government spending on infrastructure
and a new round of deregulation, all of which should
be favourable for luxury watch sales. Then, as history and FH
data suggest, look for a bust, as deficits soar.